Multi-Lot Multi-Timeframe Position trading

Hi Grav,

usually you share your view on trades and pairs and readers do it not so often. Although in the last times it also happens. So now I also thought I share you my "live idea", just like ezcurrency and we can talk about it.

I entered NZD/CHF long and not others today although I have seen some good lineups. Reasons, I do not want to enter too many trades when others are still running. I want to concentrate on the process and do not enter many trades. Earlier I did it like ezcurrency, trading a pair across the board but my experience is, it is a lot more difficult to follow all pairs and add to them. So I rather enter the very best ones I like and maybe with more lot size. This way I can handle the trades better and concentrate more on scaling in. Thanks for highlighting that out.

What did I see today on the charts? The trends talk about strong USD and NZD and weak CHF, EUR and JPY.

So the question comes why did I choose NZD/CHF from all these combination when I guess many would have chosen rather JPY. I already have JPY trades, they have a little negative standing and I lost earlier from scaling into losers, I do not do that anymore. Besides that I have an extra reason to go vs. CHF. It is the EUR/CHF peg. We almost reached the 1.20 peg which means I am ready to see a strong move vs. CHF again if the peg is touched. That would give a boost for my trade. I do not see such a catalyst for EUR and JPY. Now comes the question why NZD and not USD. It is a personal reason, I like the strong USD and also ride it but I think the USD hype is just huge and can be tougher to push it high.

What do you think?

IBO

Hi G,

I forgot the question of the day :-) Today I already wrote something so comes something short. I think we are at question number 5 :-)

5. Did you finish the Expert Exit series or do you still have topics to go on? Somewhere you wrote the content of tables I guess but I do not know where so I cannot check if it is finished or in progress. That was one of the most useful part of the thread IMO.

Have a nice day everyone,

IBO

Well Grav,

needless to talk about the trade. I have to find out what happened. Never have seen such a move for CHF. It took right away my SL out.

Have to check it now. This was a fast trade....

IBO

Hi Graviton, I am a bit curious as to how you like to manage stops and break evens after initial entry. I think I understand your basic methodology, but I hope you won't mind me asking your opinion about a real example from this week. I appreciate you sharing but if you dont want to get into commenting on trades all the time, its very understandable, so I thank you again for all you have shared as you have really done your homework and are sharing the fruits of that work with us.

I took a short on EUR/USD on Tuesday at 1.1820 about an hour after the London open - for all kinds of reasons, it looked like (and was in fact) a good entry. My aim was to start building a stack and to look to exit at least partially just above 1.16.

Once the trade got to about 1.1760 I moved the stop loss to break even and decided I would look for another entry the next day.
I had to be offline unexpectedly the next day, and of course there was the spike up to 1.1835 which took it out at break even.

Obviously I expect a lot of break evens, but my question to you is whether you would have done the same as me (had you been online with this trade), or moved the stop up but maintained more breathing room, somewhere short of break even? given that first target was 1.16 area.

In short, if you are going for about 200 pips, is it reasonable for you to be prepared to take a loss after being up 95 pips?

I meant to say, risk a loss.

Well, it's a wild morning here at Central Command just after the SNB dropped their peg to the Euro. I hope none of the traders here were too heavily exposed to the Chf. I had been advising against trading that pegged currency for the past 3 years and we just discussed it here a few days ago. Some brokers are just ignoring stops of traders who were losing in those trades. Of course, stops can't execute in the middle of a gap as there are no trades at that price. I've heard of some traders who had their accounts wiped out when prices gapped far beyond their stops. This is one reason (there are several) that we never want to keep more money in our trading account than is required for margin.

Regarding my earlier post for EU longs, I was stopped out for a small loss. After looking at it again, I just shorted EURUSD again since it broke the 1.17 option barrier (see http://www.cmegroup.com/trading/fx/o...rest/main.html for Feb options for EUR). Also now that the SNB removed the peg from EURCHF, that is even more bearish for the EUR! ECB will start a QE soon ... bearish for the EUR.

As for my xxx/JPY longs, I had many xxx/JPY longs with SL at b/e on all (and two CHFJPY longs from 114.xx), and I woke up and most JPY was stopped out, except the two CHFJPY longs were at 133.xx !!! I closed them out for over 1900 pips each! :-) It was like a 8% gain overnight!

These are the craziest moves I have seen in my 18 yrs of trading and 13 yrs trading FX!

Regards,
EZ

Yes, this was a "Black Swan" event. Be very conservative until this all sorts out. This is the reason I don't trade with tight TP settings. The fundamentals all favored long Chf trades (trading the chf would go up in value against other currencies). Anyone trading in-line with the fundamentals would have made a ton of pips. That will be the case more often than not with these large moves. They tend to move in the direction of the stronger fundamentals more often than not. Glad to hear you were on the right side of this one overall. Keep calm and carry on.

G

Well, you should be doing very well with your EU short this morning. I wouldn't take a loss after being up 95 pips on a single lot. Losing is a hard way to make a profit. By doing that you'd be allowing a risk to unrealized gains to become a risk to trading capital. That's moving up the ladder of increasing risk, rather than moving down it as the trade progresses, as we should. I'd rather manually exit with some profit, say about one-quarter to half, and let the retracement run it course, and if I was certain of the trade, re-enter when the retracement ends. The goal is to re-enter at an even better price than where you took the exit, of course that is difficult, but even if you can't, you have pips in your account and went in the direction to reduced risk to your unrealized gains and incurred no risk to your precious trading capital. That sounds better than a loss to me. Best success.

G

Well, at least your stop executed. Many didn't and took a huge loss as price gapped past their stop by 1,000 pips or more.

As to your other question, yes, I finished the Expert Exits series, though I would like to discuss some of those issues if anyone has a question or comment. Perhaps I could go back and pull all of those posts and summarize in one book chapter form here. Best success.

G

It would be interesting to check the exact moment of the EChf fall vs. the exact moment of the SNB announcement to see how much insider trading was going on just before the peg was removed. My guess is that EChf started falling before the announcement was made, giving well placed insiders a chance to take cover. I'll leave that as a homework exercise for the reader. Off to another meeting.

G

Hi G,

You have mentioned wanting to enter into trades that are showing Momentum particularly across multiple TFs. Could you elaborate a bit, and do you have any tricks or routines for spotting Momentum shifts early on?

Thanks, AG

Good morning Grav,

you believe it or not I have a topic to discuss:

6. Why do you only trade currencies? Your method/approach is mostly technical so you could trade basically any kind of commodities, indices etc. with it.

Have a nice day,
IBO

Looks like margin call selling in EURCHF ... also pushing EU down. I covered all EU shorts at 1.15 for nice profits ... will reshort next week on retrace.

Also longed some xxx/JPY pairs for long term holds over the past 24 hrs. I'm surprised with the carnage yesterday that they held up fairly well. Now that markets are stabilizing, I think they will continue up their long term uptrends. Also historically, xxx/JPY pairs up from now till mid April.

Regards,
EZ

A very good question AG. This has to do with entries, but also trade management. We don't need to identify a good trend early on. In fact, many or most apparent trends will fail early on. We are perfectly happy with taking a 1,000 pip bite out of the middle of a long running trend. We not only want to find a trade with good momentum to enter, but when we get in one we need to decide to stay in it if it's momentum is being maintained, or exit it with as much profit as we can if it's momentum is failing. I had mentioned my trade in EU short in post # 677 and in more detail in post #665 saying,

"I'm anticipating another such trade in the EU short and I have already established a position in that one a week ago. The fundamental driver behind that trade is the need for the ECB to implement QE to offset deflation in the European economy. This is something that the ECB has never done and some question if they even have the power to do it. I'm thinking that if they can pull it off, the EU could drop to parity with the USD, a drop of 1700 pips or so. I like to bet on the side of the guys who own the printing presses. I'll discuss this a bit more later."

So the fundamentals are in place. Lets look at the technical. The definition of momentum is simple, it's the direction and amount of movement in price over a specified period of time. In my own humble opinion, momentum in a single timeframe is not very significant and it does not provide enough information to make a good decision, so I will be looking for momentum across ALL timeframes to identify a suitable trade for entry.

One can easily see strong momentum on a bare chart with nothing more than the eyes given us, but we must be aware that most of what we see isn't generated by the eyes, but rather by the mind, and our own minds can trick us in ways we can't fully fathom. For that reason, I will use a few proven indicators to check that what I think I am seeing is supported by objective fact.

I start this process with a quick look at the longest timeframe, the Monthly chart, and work my way down. Usually, I'll use the regression analysis I referenced earlier in this thread to make this quick first observation as it gives a quick up or down reading, but just about any good indicator will produce the same results, RSI above or below 50%, 5emaX10sma, etc. The important point is this observation must be objective and discrete up or down, with no room for subjective interpretation. If any longer timeframe does not display momentum in the direction I am looking, I throw the trade out. So if monthly momentum is down, and weekly is up, I don't need to go any further. I throw the trade out and scan the next one. This goes very fast. A scan of 28 pairs takes less than 10 minutes.

Of course, almost half the trades I throw out go on to prove to be good trades, but that doesn't matter. What matters is that the trades that I do enter have a slight edge that can produce profit on the average over a long enough period of time. Since the long and mid-term timeframes, like Monthly, weekly, daily, H4 and H1 won't change momentum quickly, once I have formed a quick opinion of a trade based on those longer timeframes, it won't change quickly, so I don't need to go back and check it for another half day or so. If all the longer timeframes are in agreement, but a shorter timeframes is in disagreement, like all longer are down but either the 30M, 15M, or 5M are in up direction, I'll mark that in my journal for a closer watch, since the momentum of those shorter timeframes can reverse fairly quickly. If only the 5 or 15 minute TF are going the wrong way, I'll watch it carefully as it can reverse to be an entry candidate very quickly. I only use the 1 minute at the moment of entry. If price is going up on every other timeframe, there is no reason to enter long as price is falling on the 1 minute, so I wait for it to trend up to enter, which will usually happen in just a few minutes anyway. That probably doesn't make much difference in the long run, but it keeps me honest to using ALL timeframes for entry.

In the end, this produces a list of possible entry candidates. Then I look at the fundamentals and delete any trades where I don't understand the fundamentals or where the fundamentals don't agree with my philosophies. For instance, right at this moment, all Chf pairs are strongly trending in the direction of a stronger Swiss Franc, but due to the turmoil in the markets around the Franc, I'm not trading those pairs at this moment.

I only need a very small number of trades in the end to make a very nice profit in multi-lot trading, so I'm really only looking for 1 to 3 pairs to trade. Performing that analysis this morning, I came up with all the Chf pairs and 4 others. Eliminating trading in the Chf pairs for the moment, I'm left with EG, EN, EU short and UCad long. We can do additional analysis, but I've already done technical and fundamental analysis, and anything else is probably not really that productive. I'd typically take all 4 of these trades and let the market sort it out by quickly exiting any that move against me and staying with and adding more lots to any that go in my favor.

So, about 15 minutes to evaluate the trades, make new entries, exit losers, and add new lots on where needed and my work is done. If the trade goes against me 30 or 50 or 75 pips, or whatever, I'll quickly exit it, cutting losses short. That will happen most of the time. Depending on how you like to trade, maybe 50 to 95% of trades will not survive to make 5 or more lots. If the trade goes in my favor, I'll start adding more lots to it and monitor it as it develops. I'll show my 6-lot short EU trade below from the monthly down and give a few comments. I've discussed the fundamentals of this trade over and over in this thread, so I wont belabor that anymore. Let's just look at how some popular technical indicators line up across multiple timeframes.

I'll shoot these out rapid fire, with a few comments on each. First off is the Monthly. A strong down trend is shown with Heiken Ashi smoothing it and making it jump out a bit. The 3emaX10sma cross is clearly down, the RSI is firmly below the 50% and moving down, CCI is below 0%, the Stoch cross is pegged down, MACD is trending strongly down. Pick whatever objective up-down indicator you like, this EU is trending down strongly on the Monthly chart.



Weekly EU also agrees with the down trend in all popular indicators, or just by a quick visual inspection. Though we have to be careful to avoid subjective interpretations at this point. Let's just stay objective at this early stage.



Daily is the same. Stoch isn't pegged down, but it's crossed down and headed lower.



H4 is also in a strong downtrend. The Stoch starts to show it's weakness here as being more unstable as timeframes decrease.

Looking at the shorter timeframes, The EU still shows downtrend in the H1 in everything but the stoch. The stoch is fairly unstable on these shorter timeframes.



M30 is still trending down overall, but it's obvious there is a small retracement occurring at the moment. These are the small retracements we look for to add new lots or make our new entries.



M15 is well into retracement now, and there is a little indication by the stoch that the retracement may be nearing it's end.



I don't have correct spacing to add another lot at the moment, but if I did, I'd look here to the M5 first for the end of the retracement to begin to signal a good place to add a new lot on. But if M15 has by then started trending in the wrong direction, I still need to wait until it is again in agreement to add a new lot on. There can be a bit of back and forth here until things line up.

The strong momentum shown on the longer term Monthly, Weekly, Daily and H4 charts can give us the will power to stay in this trade through the many small retracements that are sure to occur over it's life. The action at the shorter timeframes from H1 down can guide us as to when to add more lots or take profits. As always, we want to add more lots just as a good retracement ends and take profits as close to a peak profit point as possible. Repeat as necessary. Questions? Comments? Discussion?

Happy trading!
G

Whew! That last answer was very long winded. I'll try to be a bit more brief. Yes, you are correct. This method can be adapted to work equally well in any market. I have traded options, futures, commodities, stocks, etc. I enjoy trading currencies and they offer me all the opportunity I require to hone my trading skills and profit from market moves. I still own stocks, but I more simply dollar cost average those trades, buying good stocks on dips when I see one. I still trade Oil and gold occasionally, but I haven't taken a trade in them in a while. I have decided to lay off trading agricultural commodities for a bit. I was hit with some random weather patterns a few years back and just got fed up with mother natures fickle ways, i.e., I lost a bundle. For the moment at least, currency trades suit my needs

WOW G,

This is far more than I had hoped for. For me this is one of the most important posts that you have given us with obviously a great deal of thought behind it. Many, Many Thanks!!!

I have taken the liberty of translating your concepts into a Thumbs array for USDCAD which displays all 9 TFs. It is possible to see at a glance the interplay between the TFs. My interpretation is that the Lower TFs are not supportive of a move higher just yet.



In order to use the Array to switch currency pairs smoothly in all TFs at once - rather than the tedious resort to the Navigator - I use a Script by Anthony Irwin which handles the task. He also has a Script to change TFs should you have an Array with different Pairs that you would like to cluster together with the same TF. Works well for FX pairs and most CFDs as well except for Oil.

http://www.anthonyirwin.com/mt4-stuf...t/#comment-106

Best, AG